Paring Down Luxury Living at Sea

WITH THE rich and powerful," a proverb advises, "always a little patience." Patience is a much-needed virtue for the cruise-ship operator designing an exclusive seagoing community that will be home to some of the world's wealthiest individuals.

It is proving more exclusive than the builder, a Norwegian company called ResidenSea, had intended. After stock markets tumbled last year, the company had to redraw plans for the ship, to be christened the World of ResidenSea, because financing for the ambitious $690 million project suddenly vanished, said Bryn Freberg, a spokesman for ResidenSea.

The new design calls for a ship weighing 40,000 gross tons, less than half the size first envisioned but still a massive structure — 644 feet long (195 meters), two-thirds the size of the Queen Elizabeth II. Instead of 250 apartments, there will be 110, of which 42 have been taken so far. There will also be 88 suites for visitors.

The apartments will range from 100 to 300 square meters (1,100 to 3,200 square feet) and will cost $2 million to $7 million, plus annual maintenance charges that could run to hundreds of thousands of dollars.

The craft, which is expected to be completed by late summer 2001, will have the usual cruise-ship appointments, plus some unusual ones. There will be a variety of cafés, bars and restaurants, including an Internet café (there apparently is no refuge from these establishments, on land or at sea); sports facilities, including two golf driving ranges; a casino, nightclub, theater and art gallery.

There will also be communications and office facilities so that "you can run your business from this ship," Mr. Freberg said. Secretaries and other office personnel will be among the ship's staff of 252.

The ship will ply the seas at 19 knots, following the climatic and social seasons to ports such as Rio for Carnival and Cannes for the film festival. Mr. Freberg said the ship was likely to be in port about 250 days a year.

Roughly half the residents lined up so far are European, with most of the rest American. The typical resident is in his early 50s and "has made his own fortune," he said.

Apart from the numerous other amenities, the World may offer one that would be certain to make the voyage more enjoyable for the wealthy inhabitants: tax avoidance.

"There is a tax spin on this," said John Whiting, a tax partner at PricewaterhouseCoopers. "Most countries basically work on a residence basis. If you're resident there for half the year, you're resident there and taxed there. You could build a scenario that if you're on a cruise liner that circles the earth, calling at various points — you drift around the world, drinking gin or whatever — you're never resident anywhere. Clearly that has some interesting tax possibilities."

Not for the 40 percent of World residents who are American. The United States is one of the few countries that tax citizens on worldwide income, wherever they live.

For citizens of most countries, however, "in principle it can be done," Mr. Whiting said. Tax authorities assume that citizens who are not resident at home will be resident in some other country that will probably tax their earnings, but tax codes do not explicitly state that citizens must have residency somewhere and that if they do not, then they are taxed in their country of citizenship.

Mr. Whiting cited the case of Dave Clark, leader of the 1960s British rock-and-roll band The Dave Clark Five, who made a lucrative business deal during a year in which he did not live in Britain. He also did not stay in any single place long enough that year to be treated as a resident elsewhere. The British revenue authority sued him, but Mr. Clark prevailed.

"The system couldn't really cope with that," Mr. Whiting said. Speaking of the World, he added, "You wonder, if that sort of thing took off, whether they would tighten the rules. "

Mr. Freberg emphasized that the World was intended more as a resort or a floating second home than a primary residence, and that ResidenSea remains agnostic on the tax implications.

"What we always say to people asking us that kind of question is that you have to ask your tax adviser," he said. "You probably can avoid some taxes by being out of the country for 180 days or more, but I don't know if they will accept living on board a ship."

The idea that a wealthy person could live nowhere for tax purposes also drew skepticism from the head of a large Swiss bank.

"In most jurisdictions, you will not be struck off the list of tax-paying residents unless you can demonstrate that you are moving to a different tax residency," said the banker, who asked not to be identified. "In some cases, you can only abandon your tax status by giving up your citizenship. "

He added that his request for anonymity had nothing to do with company policy or a desire for privacy. "I would prefer if you don't quote me just to avoid someone asking me my views about taking up tax residency on Mars," he said.